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Published 12/1/2018
M. Bradford Henley, MD, MBA

Treasurer’s Report—December 2018

The bylaws of AAOS direct the Finance Committee to “manage, supervise, and control the financial affairs” of the organization.

As your treasurer, I serve as chair of the AAOS Finance Committee. William J. Maloney, MD, immediate past president, and Kristy Weber, MD, first vice-president, are the other voting members of the committee.

Other participants in Finance Committee meetings include David A. Halsey, MD, AAOS president; Joseph Bosco, MD, second vice-president; Thomas E. Arend Jr., Esq., CAE, chief executive officer; Dino Damalas, chief operating officer; and Tina D. Slager, director of finance. All members of the Board of Directors are invited to participate in all Finance Committee meetings either in person or via teleconference.

2017: A good year financially

The operations of AAOS resulted in a net gain of $78,000, and the long-term investment portfolio gained $7 million during the year.

Total net assets (the net worth of our organization) increased $12.4 million, from $112.7 million at the end of 2016 to $125.1 million at the end of 2017. Net assets include Ortho Properties LLC (OPLLC), which was established to finance, construct, and operate the new headquarters building. OPLLC is a joint venture between AAOS (which owns about 70 percent) and our equity partners—the Arthroscopy Association of North America, the American Orthopaedic Society for Sports Medicine, the American Association of Hip and Knee Surgeons, and the Orthopaedic Learning Center.

Combined statement of operations

Total operating revenue for 2017 was $62 million, which was $342,000 less than in 2016. The reduction was mainly attributed to less revenue generated from the sales of products and lower registrations for educational courses.

Although operating revenue was down, total operating expenses decreased by $600,000—from $60.2 million in 2016 to $59.6 million in 2017. This decrease was mainly due to lower costs related to the decrease in product sales.

2017 audit

CliftonLarsonAllen, LLP, continued to serve as our outside financial auditors, and we experienced a very smooth and successful audit. Once again, AAOS received a “clean” audit opinion that the financial statements were presented fairly in all material aspects. There were no serious concerns or management comments. It is always reassuring to get such a report from an outside auditor.

2018 projected results

The 2018 operating gain is currently projected to be $2.6 million by year end, mainly due to expense reductions.


In regard to investments, 2017 was a good year. Overall gains for AAOS investments in 2017 totaled $10 million. To date, investment gains for 2018 reached $3.3 million. Most of the funds are invested in high-performing index funds, thus achieving performance at lower fees.

In 2017, the Academy Fund, which was established in 2007 to support orthopaedic medical education and broadened in 2011 to encompass other Academy activities, was up $1.6 million, resulting in a year-end balance of $13.3 million. The Association Fund, which was created in 2008 to help fund our advocacy efforts and expanded in 2011 to support the Professional Compliance Program and other Association activities, gained $1.2 million for the year, ending with a year-end balance of $9.9 million. Both these funds are managed by Morgan Stanley and are mostly invested in index funds.

Financial transparency

To help maintain and improve the financial transparency of AAOS, the Finance Committee and staff took the following actions this year:

  • issued the AAOS monthly financial dashboard, which provides year-to-date financial results and trends at a glance in a convenient one-page format
  • held a webinar to educate new Board members on various aspects of AAOS finances
  • made quarterly updates to the 18-month rolling forecast introduced in 2012 designed to improve forecasting capabilities. Rolling forecasting enables us to focus the budgeting processes on looking forward rather than looking back. Each update shows progress toward obtaining more reliable information in a timely manner.

Fiduciary responsibilities

The AAOS Board of Directors takes its fiduciary responsibilities seriously. The Board continues to lead by example and critically examines its spending at every meeting.


As I complete my final year as treasurer, I want to thank you for having given me the opportunity to serve in this role. I would also like to extend my thanks to Dr. Halsey and my fellow Board members who work tirelessly on behalf of all of us, especially in these challenging times.

If I can be of assistance to any fellow or member of the Academy, please contact me through the Academy offices.

Bradford Henley, MD, MBA, is the current treasurer of AAOS.